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Denmark

Denmark

Eleventh hour rescue package agreed

With an immediate capital injection of $71.4 million and the promise of a further $28.5 million in the next few weeks, Denmark's second largest wind turbine manufacturer, NEG Micon, has ridden out the storm which threatened to engulf the company a month ago. The financial life belt -- which has rescued NEG Micon from having to use its entire equity capital, and more, to cover a projected loss for 1999 of $78-86 million -- was thrown by the company's major shareholders and banks after a week of intense negotiations.

The extent of NEG Micon's financial crisis was revealed on September 30 when the company told the stock exchange that its entire equity was at serious risk (Windpower Monthly, October 1999). The shock news took the Danish press by storm. A week of talks behind closed doors followed before the rescue package emerged. During that period, daily news reports in the broadcast media included a mid-week documentary by the major TV channel, while the press devoted hundreds of column inches to the saga, with banner headlines stretched across front pages many times over. Misinformation was rife, including statements made with great authority that the company's capital had been lost not once, but twice. This was not the case.

The real story is that the company is under new management following the departure of managing director Jens-Erik Kristensen (fired), financial director Erik Lohmann (resigned), marketing director Klavs Bech (resigned) and the chairman of the board, Gerhard Albrechtsen (resigned), a businessman of otherwise high standing in Denmark. The new boss, Torben Bjerre-Madsen (interview page 34), and the acting director and board member Erling Lindahl, delved deep into the books. What they discovered was that NEG Micon's equity capital of around $70 million would not be enough to enable them to effectively clear up the mess in which the company, its 25 domestic and foreign subsidiaries, and its 1800 employees were in. A series of problems had been allowed to grow, more or less unhindered, over a number of months.

Drowning

A major injection of capital was needed. This could come from the company's shareholders and its banks or from a new owner. Speculation was rife about which of the world's major power industry players could be interested in buying a wind company which, despite its problems, has an order book worth $400 million and will log a turnover in 1999 of $672 million. Enron, Siemens, ABB and General Electric were all named by market analysts quoted in the press and media.

The week long negotiations that ensued were not just about keeping the company in Danish hands, however. The goal was to also tie the banks to the deal in such a way as to prevent them suddenly foreclosing on lines of credit. Furthermore, the main shareholders had to be persuaded to dig deep into their pockets if the company was to be put back on a sound economic footing, both in the short and long term.

At the time the shareholders were Schouw & Co, with a 36.8% share, three state pension foundations with a combined share of 10%, Denmark's public employees pension fund (8.3%), a major workers fund (6.4%), Unidanmark, a division of Denmark's Unibank (4.9%), Momenta ApS (3.6%) and the Union Bank of Switzerland (2.3%). The remaining 28% was owned by small shareholders, including NEG Micon employees.

The life belt

The negotiations resulted in the four major shareholders providing an immediate debenture loan of DKK 300 million ($42.6 million) together with insurance conglomerate Tryg Baltica, which has increased its relative holding in the company. A further DKK 200 million ($28.5 million) has been wrung from financial creditors Unibank, Dansk Kaution, the Financial Institute for Industry and Trade, and Sydbank, who agreed to convert existing credit facilities into net capital.

At the same time the creditors have pledged to maintain "all previous credit and guarantee facilities," assures NEG Micon. The temporary provision of working capital, adds the company, ensures "that the liquidity will be fully sufficient."

NEG Micon has until June 30, 2000 before the debenture falls due, but it intends to repay the loan before the end of the year after raising DKK 700 million ($100 million) in a new share issue to extend its capital base. The five main shareholders, who together now own 63.7% of the company, have committed to buying shares commensurate with their current holdings and to retaining them until at least six months after purchase. Aros Securities has underwritten the remaining shares from the flotation, the last piece of a financial jigsaw puzzle that will bring NEG Micon's working capital the right side of $70 million. Furthermore, Unibank and Sydbank have options to buy up to 7.5% of the shares held by the five major shareholders at a preferential rate. The option can be exercised one day prior to repayment of the debenture loan.

Rough seas

Whether the banks can turn a handsome profit on their options will depend on the health of NEG Micon's shares. Share prices nose dived on September 30, from DKK 278 to DKK 50 in just 45 minutes. From that moment they became an object of speculation, rising swiftly to DKK 120 the very next day, before stabilising to around DKK 130 a week after the life belt was thrown.

For shareholders who remained cool, some of the DKK 2.2 billion that went up in smoke on September 30 is now trickling back onto the balance sheets. NEG Micon was founded in 1997 from the merger of two of the earliest wind companies, Nordtank and Micon, with Nordtank's co-owner and director, Vagn Trend Poulsen, the driving force behind the deal. Poulsen became one of NEG Micon's main shareholders, retaining his 5.2% of the company after he resigned as director and board member. Before the dramatic events of September 30, his shareholding would have been worth $23 million, but it was sold long before then, he assured on October 1.

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